Albert Edwards: “Something Bad Happened In November"

From SocGen's last standing realist, Albert Edwards, now that both Dylan Grice and James Montier have departed for the buyside.

“Something bad happened in November”……

...I have spotted the excellent Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) doing the rounds reiterating his call that the US economy is already in a recession. He seems to be getting a bit of stick recently, but as I am fully aware, bearers of bad news are usually derided. I think he is doing an excellent job of explaining his stance patiently and clearly in the face of some very hostile interviewers. His recent 7 December analysis on the ECRI website of why a recession is likely to have started around four months ago is well worth an uncomfortable read - link (see also the related video link).

Certainly if the US has already slipped into recession, this would help explain why our preferred measure of whole economy profits declined, albeit marginally, in Q3. We have always monitored pre-tax, domestic, non-financial, whole economy profits particularly closely because this measure of the underlying profitability of the business sector is probably the best leading indicator of domestic business investment, and that has also been weak recently.

Many have attributed the weakness in investment to uncertainty about the fiscal cliff. But if underlying profits are under pressure, then so too will be investment. So although much of the S&P eps downgrading by analysts is being attributed to severe weakness abroad, what the latest whole economy profits data show is that the domestic business situation is also weak. The ECRI recession call should be listened to more closely.

Certainly the latest National Federation of Independent Business (NFIB) survey in November was entirely consistent with an economy already firmly back in outright recession. The headline optimism series plunged 5.6 points in November to 87.5, which the NFIB itself says is one of the lowest optimism readings in the survey's long 30 year history.

“Something bad happened in November…and it wasn’t merely Hurricane Sandy”, the NFIB chief economist Bill Dunkelberg is quoted as saying - see chart below and link. Even scarier than the decline in the headline measure was the 37% slump to an all-time low in those firms who believe economic conditions will improve over the next six months. That 37% drop is twice the previous record 18% decline, which occurred in the immediate aftermath of the Lehman’s collapse (see chart below). For those who might immediately retort that this is a sentiment indicator that should be used as a contrary indicator - you are wrong. It is a good leading or at worst coincident indicator. I would say this datum is more than consistent with the recession that Lakshman Achuthan of the ECRI has been warning of, wouldn't you?

First it starts in the Universities, once they are gone. Then the media is rounded up, including the fart catchers that thought they were a "shoo-in". Then the hospitals are taken over and doctors are killed one by one until someone jams a scapel in the hand of the Janitor, the only person walking the halls of the place. Then it just gets worse from that point...

Bosnia...all those pleasant memories. I understand it's still a shit hole.

Gee! I wonder what happened in Novemeber to cause independent business to think the future was going to be multiple of times worse for them then the Lehman collapse? Ummm, well, Sandy would be a boone due to supplying the reconstruction effort. If anything that would have been a positive. (assumes thinker posture) hmmmm.... Oh! I think I've got it! A natural disaster can be dealt with by increasing business activity. But an UNNATURAL Disaster, such as the re-election of the fraud known as BH Obama, can't be healed by more and more business activity. The UNNATURAL DISASTER of Obama's second term MUST be (in the view of independent businesses) multiples of times worse impact than Lehman.

Correct. this guy is an idiot. The fascists buy your "representation" in order to change laws making theft legal. The totalitarian laws are put in place later for your "protection" in order to crush any uprising when it eventually becomes clear that a massive theft has occurred. The GOP fell for it hook, line, and sinker by marginalizing Ron Paul and changing the rules at the convention so that these delegates and any voice for prosecuting the fraud was silenced. Idots like this will get what they deserve. Real conservatives should have gone apeshit when a 30-seond vote was "adopted" in order to silence these voices. Bread and circuses until the supply chains break, enjoy.

No, I don't think that the GOP fell for anything. They KNOW that this is how it's done if you want power. Ron Paul should never be equated with the GOP.

REAL anyone doesn't play party politics, because... it's all NON-real. One either DOES or one shuts the hell up. We have WAY too much (meaningless) talking going on and not nearly enough action: politicians and talking-heads do NOTHING.

You're not paying attention. The GOP is as much a part of this fascist take over as the democrats. They marginalized Ron Paul precisely because of that. There is only one ruling party the CFR. Both parties answer to the CFR. The NDA act, a law put in place to crush any uprising, was passed by 95% of the Senate. Republicans and democrats alike passed an unconstitutional law that takes away your right to due process.

Mussolini took over the corporations, as did Hitler, and created "corporate states". They both had henchmen sitting on the boards to control and direct investment/production. And in the case of Musso I always thought he got the trains running on time, although I'm later assured that all he actually did was to get the Italian media to report that the trains were running on time. Musso is where one Mr Tony 'Teflon' Blair in the UK got his ideas from.

government is a corporation. we just vote for the board of directors who once in office try to stay in office. The Boards hands are tied by numerous contracts between the government corporation and other corporations with words like union, university, health and department of in their name amongst other words.

Actually, fascist governments don't usually take over businesses in the sense of stock ownership; that's what the commies do. Fascists usually exercise control via the regulatory system. To influence this process, big corps pay over $bribes$ to government (donations and others) to ensure favorable regulations. What you end up with is corrupt, crony capitalism and the citizen/consumer is always the loser. Best example of this is the banking industry today: Too Big To Fail -and- Too Big To Jail.

What is developing IMO is a defecationally enhanced new hybrid system. You have on the top end, a quasi fascist banana republic, letting crony corporations get away with murder through their puppets in the government.. BUT, on the low end you have socialism in the form of escalating hand outs which serve ostensibly as bribe money for hangers on, and the increasingly marginalized middle class to not riot.

Historically Fascism was far right because the metric used to measure was flawed. Then they tried the 'horseshoe' and it was still flawed but slightly better at describing political realities. Currently we use an ideological grid like this one www.politicalcompass.org to describe political leanings. This system is far more accurate at describing ideological reletivity than previous metrics.

Far right and far left were used to show the sheeple that we had the best system because it was 'balanced' between the extremes. The United States of America is, and has been for some time, an increasingly fascist state.

Fascinating. I've often thought something along those lines myself. Another possible explanation is that the Left were so guilt-ridden by what their German fascist comrades did in WW2 that they became determined to distance themselves from fascism as fast as possible. How better to do this than claim that fascism is on the "far right", thereby absolving themselves from any guilt, and also opening the door to reinventing themselves.....yet again.

Fascism is a 1930's nickname for big state socialism. Fascism was created by Mussolini's use of the ancient fascii to market his new old order of Rome.

Today, many big state socialists proclaim they do "things" for the benefit of the people, or children, or what ever sound bite sounds good. Sometimes they claim denying physcial objects such as gold or guns will improve your life.

Yeah, I came across politicalcompass a few years ago and it's quite good. However, I found some of the criteria they use is slightly off and have moved over to a much more simple one myself:

I simply position people politically on where they sit on a scale between "100% - 0% government". 0% being zero government on the Right with a free market economy, absolute freedom and probably anarchy. 100% being totalitarian on the Left with big govt police states, where you have to sign a form in triplicate to go to the bathroom.

As we are seeing across the US/UK/EU, govts are becoming ever bigger and more totalitarian as each year passes.

I've thought for many years that only big entities ( Megacorporations ) can coexist with big government. Small businesses can't allocate such limited resources as they have to tracking what the government is doing and so for most of them planning is restricted to the owner.

Fascism was the popular name for the National Socialsts in Germany. Under that system, the farmer owns the cow and if the cow dies, he takes the loss (or maby gets a tax credit), but he is told what kind of feed to use, what market he can take the cow to and how many cous can can run on his land. But, he owns the cow.

Ummm...that has become the leftist education establishment definition of fascism. Fascism is in fact a large government that is all controlling. If you are to the right, libertarian or even anarchist, you are advocating for a small or non-existant state. A small state cannot become totalitarian, that was the beauty of the American Revolution. Fascism is private (crony) ownership, under a totalitarian state control. Do not accept the leftist education establishments definition of the political-economy, they are trying to rewrite history. Just think of the NAZIs (National Socialists) when considering fascism. The NAZIs were large state, socialists. They just believed that the German Volk were superior and their (national) will should be imposed upon the world through socialism. JMHO

Only insofar as the Left describe it. Fascism is a totalitarian system of government whereby every person must obey the state. Just like communism but without the state ownership of production crackpot-ery, although fascism continues to control production. Apart from that, you really couldn't get a fag paper between them; both are at the opposite end to free market capitalism, freedom and individualism.

Umm, what is it about the name "National Socialism" that you are missing Barack jr? NAZI is a stopping point in the continuum to communism. It is merely who owns the means of production. In NAZI theory, the state partners and guides. In Communism, the government owns it.

FORWARD SOVIET!

“Ideas are far more powerful than guns. We don't allow our enemies to have guns, why should we allow them to have ideas?”

Almost correct with your statement of who controls production. But the theory with Communism is that it is the workers (labor) that controls the business, not the managers. Communism was to be a workers paradise in theory. In reality, all workers were forced to join the Communist Party. Thus the party controlled the means of production, not the workers. Therefore in reality, Communism is no different than Fascism. All means of production is controlled by a single hierarchy in a symbiotic relation with government. In Communism, it is the single Communist Party. In Fascism, it is the nexus of elected government officials from two or more political parties bought and paid for by crony capitalists. The result is the same as with a Monarchy or Dictatorship. Totalitarian control by a few with the citizens as serfs.

The problem i have with 'isms' is that they are generally systems of thought intended to replace actual analysis and thought of specific situations deduced from a prejudged general set of inductive conclusions.

Government comes in many forms. Democracy, Monarchy, Oligarchy and Authoritarian.

Communism, Facism, totalitarianism all fall under the Authoritarian category. They're just varying states of how much the government controls.

Communism is where the government owns it all and you work for them. We're not there yet. This can even come in various forms. N. Korea is a communist dictatorship. It's a dictatorship and communist. You can mix terms and still be correct because the type of power structure is not the same as the form of government.

Facism is Mussolini in WWII. Kinda like the new Nazi fervor in Greece.

Socialism is where they own most of it. We're getting close.

Overall, though, we are a Kleptocracy. Those in power are seeking more power at the expense of those not in power. Taking from the masses and giving to themselves and their supporters. It's a Klepto-Republic Authoritarian Police State (CRAPS), folks.

I'd say that communism/socialism comes as the result of the kleptocracy over-extending itself. Folks that are so twisted up in fighting against communism/socialism essentially allow this entire sequence to unfold as they take their eyes off of the kleptocracy. Proof that one often times becomes what one is fighting against... this should tell you that the BEST "solution" is to be what you want things to be and thereby set the example for others (most, however, spend their energies on trying to change others- and this doesn't ever work).

Communism is actually an economic theory, not a political theory. Marx, Lenin, Stalin, Mao and others felt that the only way to establish communism was through totalitarian authroritarianism. Marx did, however, envision communism ending up in a pure democratic political form. Anarcho syndicalism.

Perhaps Communism and Fascism should be viewed as two sides of the same coin. Both belive in Statism/Central Planning and the results are much the same - a loss of individual freedom and an ecomomy like the former East Germany.

As many of the Tylers said repeatedly, the markets were being artificially stimulated until the election. When the election was over, the mainstream media tried to blame the sudden swoon on Sandy... but it ain't roket science to figure out what happpened: The illusion of "recovery" was suddenly not very important...

The despondency captured in the business surveys is mostly the result of soreheads due to the election results. Anything one inch to the left of their political views is fascism or communism. That is just an emotional response, not clear thinking.

Selena Gomez & Justin Beaver need to get back together ~ That'll turn things back around again...

~~~

Edit: A junk???... Who could possibly not understand that piece of shrewd logic?... Y'all listen to francis_sawyer... It all went to shit when Beaver & Gomez broke off their 'storybook' romance... Until those two get back into each others loving arms again, it's DOOM & DESPAIR all about the land...

Oh... & until everyone stops blaming Kate Middleton for her nurses suicide ~ the elementary school killings will continue...

When will people understand?: the capital was made up to begin with, it was virtual wealth!

Further, the entire accounting system was/is a sham. To pretend that something that was fabricated was stolen, well, I think we're deluding ourselves. We can sit there and pretend that we were "wronged" or we can move on... Reality doesn't give a fuck what we do.

Heck, they're so good at it by now they can probably churn one out every day. Surely this is good for GDP, right? (population reduction, increased funeral income, bolstering the prison complex- what more could someone like Krugman want?)

Transference of debt from the private sector to the public sector continues... Most think that this is some planned action to institute communism (or whatever "it's gonna get me" thing is). WRONG. It's the end of growth because we're living on a finite planet and we've been over-mining its resources (resources that kept the growth Ponzi going). Go ahead, look around you (and also look in the mirror), see all those folks with a sense of entitlement (this applies to people across the board [think corporations too], how would YOU pull the plug without causing massive upheaval?

TPTB aren't going to pull the plug until they are situated as best then can be (and, really, that's a strategy that most should undertake, exception being that we don't do it based on their say-so).

When one realizes that growth is finished (and that it's no one or any one system's fault, and that the notion that perpetual growth on a finite planet is THE flaw that delivered us here) one can then get down to moving forward; and, there's no need to wait, ever.

Perhaps someone can educate me. If the Fed is purchasing both MBS and Treasuries and the Fed is a private entity, is not the Fed holding the powder keg? Is not the Fed the new "bad bank"; a bad bank that the government can disolve ( along with a good portion of the government's debt)? If the view that Debt is money is correct, then a new central bank creation can wipe out exisitng debt and created money.

I'd hypothesized this scenario quite a long time ago, that the Fed is the ultimate bag-holder and the US govt (the people) will claim that the Fed is a private entity and NOT part of the US govt. Think about it, everything is brewing to make the Fed out to be the bad-guys; it almost seems to easy...

The Fed et al were really about the growth-paradigm. Sometimes you just have to hold a mock funeral in order to bury your old baggage. The future is going to be much different now...

What you have to understand in all this is that the difference between Bernanke and us is that he originally thought he did understand what he was doing, but we never did understand why he thought it was going to work, and the thing that has changed is that he is now realising that he doesn't understand what he has done. However I doubt that he will ever understand why it did not work.

The way you can tell that a person is 'safe' to invite to one of your holiday parties isif they use the term 'Bennybux' or 'clownbux'... francis_sawyer is NOT SAFE to invite to any of those things (because I tend to call them what they REALLY are)...

I've seen the same thing as has my brother's business. I think it may be tangentially related to the election, but we both saw a pretty obvious slowdown start in October. It's very reminicent of Q4 2008 (for my biz, I'd say it's about half as bad as '08, for my brother's, as bad or worse.) He's far more consumer-facing that I am, so I'm guessing this means that things are much worse at the street level, which implies holiday sales could be atrocious.

I do a little dis and a little dat but one of the things I've been doing for the longest (20+ yrs) is design and build custom porfolio books/cases/boxes for a variety of artists/designer/architects, etc. The individuals that I do work for have been keeping me surprisingly busy this fall because they're "hoping" 2013 will be better and want fresh presentation material. NONE of the firms that I do work for are spending any money at all.

Look,either some white knight comes along and takes all that crap MBS off the FED's books (not happening) or all real estate could magically appreciate in value (it needs to drop by half to interest the overseas buyers,and then in a society with no riots like Greece),or the standard salary of everyone needs to triple in value in order to pay mortgage and start buying iphone crap,get consumerism going again. I feel like the US is one of those wounded zebras being circled by leopards,in one of those wildlife shows from the 60's.Someday soon the kids will be asking why our highly paid (bought?) Congress allowed (enabled?) this scenario to happen. They have printed bucks from here to the moon and it hasn't worked.They have killed around 8k of our lads (and lasses) and millions of brown skinned people for ten years or more.Is Afghanistan or Iraq closer to stability? Our NATO allies bringing their troops home (smart move).Light at the end of tunnel anyone?

I don't believe that the money printing was undertaken because TPTB wanted to do it. I believe, instead, that it was, as is always the case, a last ditch effort to buy time before impact. The growth machine was cranked to max and it was clear that it couldn't be fed enough to keep it going; so... they tweaked other stuff to make the appearance of growth.

I'm not thinking that animals who have overshot their carrying capacity sat around thinking about "austerity." It's about survival; always was, always will be.

*not really, fascism is when the corporations take over government... and create a totalitarian state.*

I like your definition better. I've been to Communist countries and they have a lot more freedom than I have.

Only two things to remember:

In America you can say what you want and, for the most part, be left alone as long as you don't do anything.

In China you can do anything you want, except drive drunk and kill people, as long as you don't talk about it.

Leaving for the PRC on Friday, plan to have dinner with a Railroad Court official, a fighter pilot and go clubbing w/ a piano teacher.

Should be interesting.

It will be good to get away from this violent, pychotic "holiday" USA population. If I never hear another Chrismas song it will be to soon. Last weekend in Boston was bad enough. Leonard Cohen did a three set show at the Wang Theater which was fantastic. The rest of the city was puking on their shoes.

I'm out of here bitchz!

I hope I can get ZH in China. I'll be drinking bia jui and eating hot pot all the way through the new year and so happy I won't have to fight with the ugly nasty people in traffic jams to get a parking space so Joe Six Pack and family can get to Charley's for their family reunion or deal with police check points.

A good start would be arresting some Bankers (viz Iceland).Confidence would be restored to the markets (what's left).

I have a dream where all,repeat all,the economists that spoke or wrote endorsing the present system are paraded on the White House lawn in front of the cameras,their reputations and theories completely discredited.

Also,people in the past have used resignation as a form of protest against policies which they felt were unsound or even criminal.Why doesn't this happen anymore and on the rare occasion that it does occurr,shouldn't the media support their actions,or do they consider it too japanese?

THAT is the art of war. It’s a game of patience, a passive aggressive adolescent game, and the white niggers have been kind enough to build an implicit weapon for the purpose. Only a fool assumes a laborer is a fool, and fool has no idea what a laborer looks like, until he does.

Call me racist, sexist, whatever divide and conquer projectile you want, and then go f- your politically correct self, because this process is going to end in a military maneuver, to eradicate the cancer. It always does, and the politically correct are going to be strapped in a passenger seat or in the fuel mix, and I don’t care which.

Funny, I didn’t care where I slept as a kid, and I had this go-to hole out on Market Street, where the cops were afraid to go. I was the only white kid that walked or rode a bike through that neighborhood, every day. I had my share of run-ins with blacky (as opposed to whitey), so I got to know all those black grandmas pretty damn well, to the point where they invited me in for snacks. The only thing that scares a nigger, of any type, more than a dog, is grandma, because she can make his life a living hell, and he knows it.

And when I wasn’t sleeping there, I was sleeping in a Marine Quonset, in a closet at the Naval Hospital, at one of the shops on 32nd street, or in some ship’s engine room, and guess who was in charge. There is always a bigger, stronger, smarter, kinder black guy, to show another guy the ropes. The upper middle class is like an endangered species in the zoo, holding its nose up on the way into the shop, to be pruned and preened by its handlers, for extinction, through equal protection UNDER the law.

Capital is complacent because synaptic DNA can and is modified in real time, forward for a few, and relatively backward for most, until it’s not, and we have reached that point once again, in this episode, where the majority realizes it has been paid in each other’s credit, by capital, to float downhill into synaptic slow motion, waiting in line to wait in line, for capital credit, which can now only recede into itself. The only real requirement for a small business, which is against the law within the so-imploding empire, is to be honest, because labor is more than capable of doing the work, with or without business. We don’t need a silver bullet, best business practice, or anything else from nonperforming capital.

Capital started sending the middle class in to take our children in the 70s, and that is when the war began. If you don’t see that, you are normalized. Capital builds physical bombs, with our assistance. The middle class builds intellectual bombs, with our assistance, and labor builds spiritual bombs. Funny, how work works. No labor, no work, no DNA. Faith is not a mystery; it’s hard work, that very few are capable of sustaining.

A teacher, with guns, and a mother of an autistic, unsupervised child placed in charge of those guns. Who is responsible? What is the crime? What is the reward, positive feedback signal circuit, ensuring the outcome? More and more of their own, killing more and more of their own. It’s the elevator problem all over again: Why should I fix the circuit when I am becoming wealthier, exponentially faster, relative to the losses nonperforming capital is sustaining?

As we see in San Francisco magazine and elsewhere, the white women are offering upthe Asian/Chinese women, and their brothers, as scapegoats, now that the empire is reaching terminal velocity, along with the usual subjects, Feinstein, Boxer and Pelosi. We are hunting the nasty-a-white, passive aggressive, nigger behind them, pulling the strings. We have no interest in playing stupid games with middle management or their robots in the street; Willie is Willie, another nigger in an expensive suit, God bless his little heart; and the pothead who couldn’t, Jerry Brown is not our man. Who do we have left?

Who hasn’t been suggested as a fall guy? Let’s begin by turning 180 degrees. Funny, how Kissinger’s face keeps popping up, the man with an imperative. Between Kissinger, Netanyahu, and Madoff, the Mad-off was the relatively honest one. San Francisco, like present day Jerusalem, could not be further from Jesus.

Go ahead, tax me, and tell me how monetizing digital dollars coming out of the bazooka is not monetizing a phantom tax base?

"Capital started sending the middle class in to take our children in the 70s"

1971, off the gold standard (US defaulted), peak oil production/export (US turned down the other side of the trade balance ledger).

None of this is complex. The current is now deep and swift, we KNOW where it's going; we must not be distracted by that which washes down (if you wish to use faith/religion as your guide to help keep from being sucked into the distraction, fine, whatever coping mechanism one needs).

Mussolini, the head of the national Fascist Party, was a former member of the Marxist party in Italy, the Socialist Party. He changed not from any fundemental disagreement with Socialism, only with the methods.

Mussolini split with them over participation in WW1, but he did not change philosophy.

Similar to Hitler, the head of the National Socialists of Germany, he rejected the 'internationalism' of Soviet communism for a more nationalistic socialism.

But Socialists they all were. Their values and goals were identical to the 'progressives', an American version of the same thing.

It is a common misperception that this (The Fascist Party) was some far-right party, but their objectives were similar to communism, but with local flavor instead of a global (Soviet, 'der internationale') outlook.

'The commonwealth takes precedence over the individual' was the motto of one of Hitler's chief economists. BTW, he reeived an economics awards in the U.S. in 1938. Good ol' FDR!

Compare his motto with 'you didn't build that', the current U.S. quote, and discuss.

At their last meeting for 2012, the Fed and its Chairman were in generous pre-Christmas mood. Bernanke announced further bond purchases – altogether USD 85 bn per month. In addition the Fed promised – with some caveats – not to touch interest rates until the unemployment rate has dropped to 6 1/2%.

After decades of monetary targeting, inflation targeting and inflation expectation targeting we managed to come back to the good old Phillips curve! However, one should not underestimate the risks of Bernanke’s policy. Can we rule out that the natural unemployment rate in the US has not permanently risen during the crisis? This would mean that inflation can start accelerating much earlier and that the Fed might have a hard time to get rid of the spirits that it called. This is admittedly a medium-term problem, but the risk of further bubbles in asset markets is much more imminent. It is pretty amazing that after lots of soul-searching and at least some mea culpa from central bankers following the burst of the mid-2000s bubble, the Fed is doing it again. With the first major central bank taking the unemployment rate into focus, calls in Europe for a similar mandate for the ECB can only grow."